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Rating Action:

Moody's changes Mabe's outlook to stable; affirms Baa3 ratings

28 Jan 2021

New York, January 28, 2021 -- Moody's Investors Service (Moody's) changed today Controladora Mabe, S.A. de C.V.'s (Mabe) ratings outlook to stable from negative. At the same time, Moody's affirmed Mabe's Baa3 senior unsecured and issuer's ratings.

Affirmations:

..Issuer: Controladora Mabe, S.A. de C.V.

.... Issuer Rating, Affirmed Baa3

....Gtd Senior Unsecured Regular Bond/Debenture, Affirmed Baa3

Outlook Actions:

..Issuer: Controladora Mabe, S.A. de C.V.

....Outlook, Changed To Stable From Negative

RATINGS RATIONALE

The change in Mabe's outlook to stable from negative reflects the strong recovery from the impact of the Covid-19 outbreak and our expectation that the company's operation and credit metrics will remain solid over the next 12-18 months.

Mabe's Baa3 ratings incorporate its position as a leading manufacturer and distributor of major appliances, its geographic diversification with an extensive distribution network throughout America, and its broad product portfolio with luxury and mainstream brands. Mabe's credit profile is also supported by its long-term agreement to produce and sell ranges, refrigerators and laundry products to General Electric Company (Baa1 negative) Appliances in the US and its adequate credit metrics. On the other hand, the rating is constrained by Mabe's exposure to commodity prices and foreign exchange rate volatility, event risk from its strategy to grow through acquisitions, the highly competitive environment in its territories of operation, and the cyclicality of white-line products.

Mabe's largest markets are the United States of America (Aaa stable), Mexico (Baa1 negative), and Canada (Aaa stable) which together account for 73% of consolidated sales. The company will benefit from the expected economic recovery in its main territories of operation. Accordingly, we estimate that in 2021 the US economy will grow by 4.2%, Canada's GDP will rise 5.0%, and Mexico's GDP will increase by 3.5% in 2021.

Mabe's profitability and credit metrics improved since the 2nd half of 2020. Mabe's debt/EBITDA, as adjusted by Moody's, declined to 2.3x as of September 31, 2020, down from 3.2x as of March 31, 2020. We estimate Mabe's leverage declined towards 2.0x by year-end 2020 as the company's EBITDA continued to increase while paying down around $163 million in debt.

Mabe has a strong liquidity profile. Mabe reported cash on hand of $203 million as of September 31, 2020 that covered 3.3x its short-term debt. In addition, Mabe has around $440 million in advised credit facilities to support its working capital requirements. Mabe has consistently generated positive free cash flow (defined as cash from operations minus dividends minus capex) in 2015-2019 and over the twelve months ended September 31, 2020. While the company will rise its capex to around $160 million in 2021, to finance the increase in installed capacity, we estimate that it will continue to post positive free cash flow in 2021-22.

FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS

The ratings could be upgraded if the company improves its profitability while maintaining strong interest coverage with adj. EBIT/Interest expense above 5.0x and leverage (adj. debt/EBITDA) below 2.5x. To be considered for an upgrade, the company should also keep its long-term contract to produce GE products for the US market while posting robust liquidity and cash generation.

The ratings could be downgraded if adj. debt/EBITDA remains above 3.0x for a prolonged period of time. A deterioration on Mabe's profitability, liquidity or credit metrics could trigger a downgrade. A change in Mabe's long-term contract to produce GE products that could jeopardize its relevance for GE's US market could also result in a downgrade.

The principal methodology used in these ratings was Consumer Durables Industry published in April 2017 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1060509. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

Controladora Mabe, S.A. de C.V. is a Mexican manufacturer and distributor of refrigerators, ranges, dryers and washing machines and distributor of built-in ovens and hoods, water coolers, dryers, dishwashers, microwave ovens and related parts and components. The company is currently 51.6% owned by Mexican shareholders (Berrondo and Saiz families) and by the Haier Group (48.4%). The company reported revenues of $3.1 billion over the twelve months ended September 31, 2020.

REGULATORY DISCLOSURES

For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.

For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.

These ratings are solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1243406.

The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.

The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the UK and is endorsed by Moody's Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK. Further information on the UK endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Alonso Sanchez
Vice President - Senior Analyst
Corporate Finance Group
Moody's de Mexico S.A. de C.V
Ave. Paseo de las Palmas
No. 405 - 502
Col. Lomas de Chapultepec
Mexico, DF 11000
Mexico
JOURNALISTS: 1 888 779 5833
Client Service: 1 212 553 1653

Marianna Waltz, CFA
MD - Corporate Finance
Corporate Finance Group
JOURNALISTS: 0 800 891 2518
Client Service: 1 212 553 1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

No Related Data.
© 2021 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

CREDIT RATINGS ISSUED BY MOODY'S CREDIT RATINGS AFFILIATES ARE THEIR CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MATERIALS, PRODUCTS, SERVICES AND INFORMATION PUBLISHED BY MOODY’S (COLLECTIVELY, “PUBLICATIONS”) MAY INCLUDE SUCH CURRENT OPINIONS. MOODY’S DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT OR IMPAIRMENT. SEE APPLICABLE MOODY’S RATING SYMBOLS AND DEFINITIONS PUBLICATION FOR INFORMATION ON THE TYPES OF CONTRACTUAL FINANCIAL OBLIGATIONS ADDRESSED BY MOODY’S CREDIT RATINGS. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS, NON-CREDIT ASSESSMENTS (“ASSESSMENTS”), AND OTHER OPINIONS INCLUDED IN MOODY’S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. MOODY’S PUBLICATIONS MAY ALSO INCLUDE QUANTITATIVE MODEL-BASED ESTIMATES OF CREDIT RISK AND RELATED OPINIONS OR COMMENTARY PUBLISHED BY MOODY’S ANALYTICS, INC. AND/OR ITS AFFILIATES. MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS DO NOT COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY’S ISSUES ITS CREDIT RATINGS, ASSESSMENTS AND OTHER OPINIONS AND PUBLISHES ITS PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL, WITH DUE CARE, MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.

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MJKK or MSFJ (as applicable) hereby disclose that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MJKK or MSFJ (as applicable) have, prior to assignment of any credit rating, agreed to pay to MJKK or MSFJ (as applicable) for credit ratings opinions and services rendered by it fees ranging from JPY125,000 to approximately JPY550,000,000.

MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements.

​
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